Micelli Company has an opportunity to invest in one of two projects. Project A requires a $480,000 investment for new machinery with a three-year life and no salvage value. Project B also requires a $480,000 investment for new machinery with a four-year life and no salvage value. The two projects yield the following predicted annual results. The company uses straight-line depreciation, and cash flows occur evenly throughout each year.

Required
1. Compute each project’s annual expected net cash flows. (Round net cash flows to the nearest dollar.)
2. Determine each project’s payback period. (Round the payback period to two decimals.)
3. Compute each project’s accounting rate of return. (Round the percentage return to one decimal.)
4. Determine each project’s net present value using 10% as the discount rate. For part 4 only, assume that cash flows occur at each year-end. (Round net present values to the nearest dollar.)
Analysis Component
5. Identify the project you would recommend to management and explain yourchoice.

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ProjectA Project B $750,000 $800,000 25,000 250,000 80,000 330,000 276,000 20,000 726,000 74,000 22.200 Direct labor Overhead including depreciation. Selling and administrative expenses 30,000 Total expenses Pretax income.... Income taxes (30%) 20,000 705,000 45,000 13.500